Schlumberger N.V. Pricing Spineometer: 1 of 5 Vertebrae


Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published November 30, 2023

Schlumberger N.V., a technology and operations company serving the energy industry, had a positive Q3 ‘23. Revenue rose 11% to $8.3 billion and earnings before interest and taxes rose 23% to $1.4 billion over the same period last year.

A review of Schlumberger’s October 25th earnings call and financial report provided insight regarding the importance of pricing on performance.

In general, Olivier Le Peuch, CEO of Schlumberger, and Stephane Biguet, CFO of Schluberger, both had little to say about pricing.  Margin improvements in Reservoir Performance and on North American revenue was partly attributed to pricing but other factors were highlighted.  Olivier Le Peuch did note an impact from the pricing environment on the Production Systems offering, but did not indicate this was an endogenous result from improved decision making but rather a random exogenous result of the marketing environment.

Fair enough. Not all CEOs and CFOs talk about pricing in their earnings call.  To get a fairer read on price management at Schlumberger, let us consider its operations and markets.

Much of Schlumberger’s offerings are bespoke, high-value, and long-term.

  1. The high value yet uniqueness of each contract implies a heavy reliance on studies of the Economic Value to the Customer of the offering as well as uncertainty in the knowledge of the price of the competitive offering. This is pricing in a high-stake, data-deprived market.
  2. The multi-year nature of many of Schlumberger’s contracts imply the opportunity to utilize indices, such as on the cost of labor or other inputs, to set the overall contractual price.
  3. The global nature of Schlumberger implies a need for pricing experts that understand the nuances and buying behaviors of customers in different markets.
  4. Business cycle and macroeconomic fluctuations increase the value of applying expert economic insights to pricing decisions.
  5. Industry changes driven by Schlumberger’s focus on enabling the energy transition from carbon-based sources to other sources (excluding nuclear) imply a need for pricing professionals to contribute to the development of business plans with unfamiliar offerings.
  6. The pricing of unfamiliar offerings includes the development of entire new business offerings in artificial intelligence (AI), the internet of things (IoT), and carbon capture and utilization (CCU).
  7. And, Schlumberger’s broad portfolio of offerings increase the complexity of pricing.

Industry benchmarks indicate Schlumberger is expected to have 55 to 280 people engaged primarily in pricing.  This analysis of their business suggests that Schlumberger would be at the lower quartile of the industry benchmark.  That is, around 100, globally dispersed, and greatly varied in focus.

Research into the investment by Schlumberger in pricing yielded greatly underwhelming results. Pricing could be found to be a responsibility of product management, marketing communications, field development, but not of a specific pricing department.  We did identify a sole Senior Pricing Manager, but that is far below expectations.  Who manages pricing at Schlumberger? Do they have dedicated experts in pricing or do they let product and sales managers wing it with oversight from finance?

Given the importance and capability of pricing at Schlumberger as indicated in financial reports, management statements, and our pricing team research, and given their performance, we have come to the following conclusion as of November 2023.

Schlumberger Pricing Spineometer: 1 out of 5 Vertebrae.

SLB (Schlumberger N.V.) was relatively unchanged at 57 the day prior to their earnings call and 56 one week later. FY ‘22 revenue of $28 billion with a 15% operating margin and P/E ratio near 20.

For FY ‘22, a 1% improvement in price would yield 6.8% improvement in operating profits holding all else constant at Schlumberger.

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About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.